What If: You’re Not Confident in Your Investment Process?
Investment analysis and due diligence are not at the core of most plan sponsors’ competencies, yet they are one of the most visible aspects of a retirement plan. This means they are also often the target of criticism, or worse, litigation.
The more you understand the common issues retirement plan sponsors encounter in their investment selection process, the more confidence you can build in your decision-making. That is why, in this blog, we will dive into ways you can boost your investment selection process — and your confidence.
What If: Most or All Your Funds Are Proprietary to Your Recordkeeper?
Certain investments are proprietary to the recordkeeper. This is not necessarily a bad thing, but it is critical that you document the why behind your investment decisions. Consider these questions to ensure you have all the necessary documentation.
- Do you have an investment policy statement (IPS)?
- Do all the funds in your plan adhere to the methodology in your IPS?
If someone asks you why they’re all proprietary, the best course of action is to show the documentation you’ve prepared that illustrates their appropriateness for your plan.
In addition to the documentation you need on why you’ve utilized your investments, there are fiduciary implications to the investments you select. By law, a proprietary vendor can’t be a fiduciary on those funds and decisions. For example, Vanguard can’t be a fiduciary when selecting Vanguard funds, so you must know the difference between reporting and advising.
What If: You Need a Fiduciary Reporter?
As previously mentioned, asset managers cannot be your fiduciary for their investments. Vanguard can’t be a fiduciary to Vanguard; Fidelity can’t be a fiduciary to Fidelity, etc.
While it is impossible to eliminate your fiduciary responsibility — no matter what anyone tells you — what you can do is fulfill that fiduciary responsibility by either hiring a prudent expert or, at a minimum, ensuring you have the structure, discipline, and documentation to show how you arrived at your past decisions.
What If: We Need a New Approach?
If you are in need of a new approach, there is one thing you must start with — engaging the right partners. The processes I’ve talked about don’t have to be complicated. The right partners can ensure you check all the boxes and protect you from liability.
In short, make sure you have an IPS, everything is in writing, your partners act as fiduciaries, and your decisions are documented.
At SWBC Retirement Plan Services, we work diligently to help you ensure that you are making confident and compliant investments. Contact us today to learn how we can help you through the investment selection process.
Sara Matlock
Sara Matlock is Senior Vice President of SWBC Retirement Plan Services and also serves as a voting member of SWBC’s Investment Committee. She has more than 27 years of experience in the financial services industry. Prior to joining SWBC, Sara was Vice President of Investor Relations for Jones Villalta Asset Management, where she provided retirement planning and investment management services to high-net-worth individuals, families, and companies. Before that, Sara spent eight years at National Financial Partners (NFP) as Vice President of Members’ Services, Marketing & Communications. She worked with firms specializing in high-net-worth clients, benefits, retirement planning, and investment management. Sara received her Bachelor of Arts in Economics, with a concentration in Engineering and Mathematics, from the University of Texas at Austin. She earned the designation Chartered Life Underwriter (CLU) from The American College and her Series 7 and 65 licenses.
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